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Stirol stops operations over high gas prices

Stirol stops operations over high gas prices

9 July 2010

Local media outlets reported yesterday that Stirol (UX: STIR UK) stopped production due to high gas prices that made operations economically unfeasible. Reports also indicated fellow chemical producer Severodonetsk Azot also suspended production for the same reason, but Aleksei Kunchenko, company president, released a statement later in the day saying its halt was due to scheduled capital repairs. Ruslan Patlavskyy: We estimate that at the natural gas price of USD 256/ths m3 (+34.7% yoy) and current market prices of USD 170/mt for urea (+19.3% yoy, FOB Black Sea) and USD 215/mt of ammonia (+41.9% yoy, FOB Black Sea), Stirol’s gross margins from production of these products comprise -11% and 2% respectively. Given the seasonal nature of demand for nitrogen fertilizers, we expect prices for urea and ammonia to gain in autumn, suggesting an improved operating environment for fertilizer producers not earlier than 4Q10.

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